ING: 'The Dollar Should Be Stronger'

GBP recovery continues, GBP/USD rate above $1.2500

The Pound has continued its recovery in global markets and the GBP/USD exchange rate has broken back above the $1.2500 level to a 10-day high at $1.2520. Bank of America strategist Kamal Sharma commented; "With sterling undershooting the move in UK rates and more balanced commentary this week, our bias would be to fade the recent dovishness and for the Pound to retrace some of its losses." The Japanese Yen was sold across the board after the Bank of Japan confirmed it would continue with an age-old policy of ultra-low interest rates and continue to buy government bonds. The Pound to Yen exchange rate charged higher to ¥195.19, its highest level since 2015, despite the Bank saying it believes inflation risks in Japan are tilted to the upside.

No Major Data

EUR/USD trades with negative bias, holding above $1.0700 Prior US PCE report

The EUR/USD pair edges lower during the Asian session on Friday and moves away from a two-week high, around the $1.0740 area touched the previous day. Spot prices currently trade around the $1.0720 - 1.0725 region and remain at the mercy of the USD price dynamics ahead of the crucial US data. The US Personal Consumption Expenditures (PCE) Price Index data is due for release later during the North American session and will be looked upon for cues about the Federal Reserve's (Fed) rate cut path. This, in turn, will play a key role in influencing the near-term USD price dynamics. In the meantime, growing acceptance that the US central bank will keep interest rates higher for longer lends some support to the Greenback and exerts some downward pressure on the EUR/USD pair. Bets that the European Central Bank (ECB) will start cutting interest rates in June, amid a faster-than-anticipated fall in the Eurozone inflation, suggests that the path of least resistance for the EUR/USD pair is to the downside. That said, it will still be prudent to wait for strong follow-through selling before confirming that the recent recovery from the $1.0600 mark, or the YTD low has run its course traders await the key US inflation data.

Major Data:

Retail Sales (YoY)(Mar): 0.6%

08:00 ECB's De Guindos speech

USD is weaker than anticipated

The US Dollar (USD) struggled to catch bids on Thursday following the release of the latest domestic GDP growth data. The US’s first quarterly growth rate reading for 2024 printed below market expectations, coming in at 1.6% rather than an expectation of a 2.4% reading, and fell by more than half from the previous reading of 3.4%. This set out to stymie USD exchange rates in the aftermath of the release on the back of a larger-than-forecast downturn, which in turn left economists and markets alike speculating on the overall economic health of the US economy. Eyes today will be on the US PCE inflation measure, if the YoY Inflation measure comes in higher than expected it will likely reinforce the Fed's 'higher for longer' base rate approach. Which, in theory, should push down GBP/USD and wipe the marginal gains seen this week.

Major Data:

Core Personal Consumption Expenditures - Price Index (YoY)(Mar): Exp 2.6%

Core Personal Consumption Expenditures - Price Index (MoM)(Mar): Exp 0.3%